This article first appeared in Wealth, The Edge Malaysia Weekly on March 27, 2023 - April 2, 2023

KAF Investment Funds Bhd won five fund awards at the Refinitiv Lipper Funds Awards 2023. It won the Best Equity Malaysia Small & Mid Cap (Provident) and Best Equity Asia Pacific (Malaysia) awards.

The wins were achieved through two funds, KAF Jade and KAF Vision. KAF Jade won Best Equity Asia Pacific (Malaysia) in the three- and five-year categories, while KAF Vision won Best Equity Malaysia Small & Mid Cap (Provident) in the three-, five- and 10-year categories.

CEO Chue Kwok Yan attributes the firm’s win to its fundamentally driven investment philosophy and its people, who are the building blocks of the fund house. This has not changed.

But there is more to that, says Chue. “We have a close-knit team that shares the same vision. Diversity is also important as it brings to the team different viewpoints that are useful in navigating the drastically different investing circumstances over the past few years. Collectively, these allow us to formulate the right strategies for each unique circumstance.”

Just like its peers, the simultaneous fall in prices of assets was the biggest challenge faced by the fund house last year.

“We overcame it by understanding the need to recognise market conditions, staying nimble and sticking to our core competency of devising the right strategies and approach to navigate this specific circumstance of correlated asset prices,” he says.

The best call Chue and his team made last year was to remain flexible and accept that the correlation between asset classes had turned positive, and that prices were generally down. As that realisation set in quickly, they faced it with courage and conviction.

“We managed the risk by decisively cutting high valuation stocks to a minimum and hiding in value stocks. This helped us weather the downshift for most of the year, while we were able to take positions from a bottom-up stock selection basis towards the second half of 2022. That, fortunately, worked well for us,” he says.

Being nimble and flexible means Chue and his team had performed rebalancing exercises across various strategies and different time frames throughout the year.

“We allocated higher weightage to value stocks than growth stocks in the earlier part of the year to manage risk. We also discarded winning stocks that we were emotionally attached to. They had served us well in 2021, but had higher propensity for price correction in 2022. We sold some of them and reallocated the funds to laggard stocks with lower valuations,” he says.

“Another thing we did was [shifting our investments] from high-beta to low-beta stocks. Some of these were then reversed in the second half of last year, when the market environment was more conducive for bottom-up stock selection. Naturally, our cash level was higher than usual, in the vicinity of 15%.”

While many think 2023 would be a better year, Chue says it will still be a difficult one to navigate. Fortunately, fund managers have had a decent start to the year, evidenced by KAF’s fund prices that went higher than in 2021.

“Having a good start in the year allows us some flexibility in managing all and not just our winning funds. By having some cushion, it also allows us to be more selective in our stock picks to invest more in those high conviction calls, rather than constantly trying to catch up in performance.

“Moving forward, we will dig deep into our core competency, as always, and focus on our competitive advantage in managing our esteemed clients’ money,” he says.

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